Light Reading
Comcast is ponying up $45.2 billion for Time Warner Cable for much more than TWC's 11 million or so video customers.

Comcast-TWC Deal: Playing All the Numbers

Alan Breznick
2/14/2014
50%
50%

Unlike the big cable mergers of the past, Comcast is buying Time Warner Cable for more than TWC's cache of video subscribers. A lot more.

Although much of the early coverage of the proposed $45.2 billion deal has focused on the 11.2 million video subscribers that Time Warner Cable Inc. (NYSE: TWC) would add to Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s already market-leading stash of 21.7 million basic cable customers, that's far from the whole story.

That's because the North American cable business is now about non-video services at least as much, if not more than, it's about the traditional video services. (See Comcast's TWC Coup: 3 Things to Know.)

So let's play the numbers game here by looking at some other key numbers driving this deal, not just the usual video numbers. Then it will become clear just how dominant a force the planned Comcast-TWC combo could be.

Broadband subscribers
With an impressive total of 20.7 million high-speed data customers today, Comcast already leads the US cable broadband market by a wide margin. In fact, like most major North American MSOs, it now has nearly as many broadband customers as video customers. Throw in TW Cable's 11.1 million broadband subscribers and you've got a grand total of nearly 32 million high-speed data users, nearly as many as the 33 million video customers that the new company would inherit.

While Comcast executives have solemnly vowed to sell off 3 million video customers to cap the combined company's size at 30 million (or 30% of the US pay-TV homes) to ease federal antitrust concerns, they've said nothing about divesting any broadband subscribers. That's even though the combined company would control close to 40% of the US cable broadband market, well above the MSO's self-imposed 30% limit on the video end.

To be sure, most cable video subscribers are also cable broadband subscribers these days and vice versa. So it would be tough to divest one without the other. But, even if it sold off 3 million broadband homes, Comcast would still have a commanding broadband presence nationally.

Voice subscribers
Voice services don't get much attention (or respect) for cable operators anymore for some reason. But they are still huge, growing revenue generators for the industry, trailing only video and broadband. So they count for a lot in this deal as well.

With nearly 10 million VoIP customers, Comcast is already the fourth-biggest wireline phone company in the US. Toss in TW Cable's 4.8 million phone customers and you're talking about a total of almost 15 million subscribers, which is a formidable total.

Major metro markets
Similarly, Comcast already boasts cable operations in 20 of the 25 biggest metro areas across the US, including nearly every major market on the East Coast and many of those on the West Coast. But the two big markets that it doesn't dominate right now are the two largest in the country -- New York City and Los Angeles. Guess which ones TWC controls?

Besides the nation's two biggest cities, TW Cable would also bring Columbus, Cincinnati, Cleveland, Charlotte, Kansas City, Dallas, San Antonio, and part of San Diego into the Comcast fold, at least before the planned divestiture. So, with just a handful of exceptions like St. Louis (Charter Communications Inc. , New Orleans (Cox Communications Inc. ), and Tampa (Bright House Networks ), every NFL city would be a Comcast city.

The Proposed Comcast-TWC Goliath
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.

Business services revenues
Here's the pièce de résistance for Comcast in this deal. With business (enterprise/wholesale) services now the fourth-biggest revenue generator for major US MSOs, Comcast has become king of this category during the past three years. The MSO racked up a total of $3.2 billion in business revenues last year, up more than 26% from nearly $2.6 billion in 2012. (See Comcast Makes Middle Market Gains.)

TWC has been no slouch in this area either, though. It took in $2.3 billion in 2013, up 21% from nearly $1.9 billion the year before. So the combined company would instantly generate $5.5 billion in business services revenues, at least before divestiture. (See TWC: Charter's Got Nothing on Us.)

Even more importantly, perhaps, TWC would grant Comcast access to the New York City and Los Angeles commercial markets, the two biggest in the country. With control of those two markets and a true national presence for the first time, the combined company could not only sign up more small and midsize firms in those markets, but break into the large enterprise sector as well. That prospect should have AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) somewhat concerned.

Indeed, on the joint Comcast-TWC conference call with the press Thursday morning, Comcast Chairman and CEO Brian Roberts made a note of the enhanced competitive capabilities of the merged firm. He said the new Comcast would be better able to compete with other national and international companies for larger customers.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

(14)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
swattz101
50%
50%
swattz101,
User Rank: Light Beer
2/20/2014 | 12:01:09 PM
Re: M&A
I believe Comcast does have some small pockets in Arizona, but Cox is the big providor, at least in Tucson and Phoenix. I found this map, I don't know how acurate and probably a little dated, but gives a picture of some of the coverage areas out there.

http://tvbythenumbers.zap2it.com/2011/01/12/picture-1000-words-us-cable-provider-map/78308/
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/19/2014 | 9:23:53 AM
Re: New York
It might be, true. I'm not entirely sure the plan all along wasn't to sell the second Glenn Britt left. DOCSIS 3.0 upgrades don't cost all that much, and you would think it would be something the company would want to invest in. But here we are in 2014 and only Los Angeles, NY and Kansas City (because of Google Fiber) are seeing any attention.

I do think the deal will pass. While I think the concerns about scale, leverage and dominance have merit (especially the use of content licensing deals and usage caps to hinder Internet video), it will be hard to prove them cleanly enough to be effective. I also bet Comcast has some theatrical conditions ready to go to make the deal sound more compelling than it is.
MarkC73
50%
50%
MarkC73,
User Rank: Light Sabre
2/19/2014 | 1:53:16 AM
Re: M&A
Ok, well its a little hard to read the fine print, it says something about DOCSIS serving areas, but I'm almost 100% sure they serve Hawaii and the coverage is most of the state, I also thought they were also in Arizona and Colorado but I'm less sure about what types of services and how much of coverage thoses states get.  Same with Kansas, I know they are in Kansas City (which is not in Kansas) which is shown.

It's a minor detail, since in the end they are targeting about 30% which means they'll need to divest some of their current areas.  The big question is which ones and to who?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/18/2014 | 9:48:15 PM
Re: M&A
Tell us more about what's missing in the map, Mark. What did you spot?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/18/2014 | 9:45:56 PM
Re: New York
Yep. Sounds about right. I wonder if New Yorkers will get any better service from Comcast, tho. The diference might be so marginal as to go unnoticed. It's still sad to see how much TWC has gone downhill. 
MarkC73
50%
50%
MarkC73,
User Rank: Light Sabre
2/17/2014 | 3:01:17 AM
Re: M&A
Yup, Cable Co's don't compete directly with each other, so I'm sure that will come up in the DoJ and FCC debates.  However, I am interested to see what areas get given up and to whom.  In my view, Comcast is a much more agile competitor.  But TWC and Comcast already had a joint tech doc for moving forward with IP services so maybe it really doesn't matter anyway.

That graphic is off.  It's missing at least one TWC area.  Or is that the proposed company and the rest will be sold off?
MikeP688
50%
50%
MikeP688,
User Rank: Light Sabre
2/15/2014 | 7:56:07 PM
Re: New York & Other Brief Thoughts
It is a bold move by Comcast--no question.     The smaller players (Cox/Charter et. al) will have their work cut out for them in terms of trying to stay relevant.   Another affirmation of what Alan noted is reflected in this chart from our friends @ Business Insider.  I did almost fell out of my chair in laughter at the claims by the folks @ Comast.   Beyond this , though,   I would humbly suggest though that the other part of the puzzle is control of content as Comcast continues to make inroads with its' ownership of NBC Universal.     Beyond the reach as discussed in the discourse here, it is content that matters--and I suggest that ultimately it is content that is crucial.    It is by no means certain that regulators will approve this right now....

May we truly live in interesting times. :-)

 

 
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/14/2014 | 7:24:07 PM
Re: New York
Time Warner Cable always took a "targeted" approach to DOCSIS 3.0 upgrades, whereas Comcast simply decided to get out ahead of the demand, largely because Comcast saw more FiOS competition in many markets. Comcast at least invests something back into the market. Time Warner Cable tells YOU what you want and if it doesn't meet their beliefs, too bad. Time Warner Cable is also behind Comcast in terms of set top boxes, GUIs, and feature set.

Both perform horribly in customer satisfaction rankings, but I do think Comcast is the better of two "evils." 
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/14/2014 | 6:07:50 PM
Re: New York
So how much better do you think Comcast can do in NYC than TWC? How badly has Time Warner underperformed there?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/14/2014 | 6:05:59 PM
Re: Running the numbers
Interesting idea. So, if I understand correctly what you're suggesting, you're looking for the cost of the deal broken down by those various metrics?  
Page 1 / 2   >   >>
Educational Resources
sponsor supplied content
Educational Resources Archive
More Blogs from Breznick Unbound
As expected, US cable broadband subscribers pass cable video subs for the first time in latest report from Leichtman Research Group.
While the No. 2 US MSO is accelerating plans for all-digital video and broadband speed upgrades, it's still desperately playing catch-up.
In yet another attempt to conquer the TV set, Google is launching its Android TV operating system for the big video screen. But will it succeed where other attempts have failed?
In the latest edition of its Visual Networking Index (VNI) study, Cisco forecasts that HD and Ultra HD video will account for nearly two-thirds of all IP video traffic by 2018.
Seven new cable products take the stage this year, covering a wide range of the technology spectrum.
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Custom TV
Razorsight Expert's Advice on Real-Time Analytics

11|27|14   |   1:43   |   (0) comments


Razorsight's powerful cloud-based Predictive Analytics solutions are used by the world's leading communications and media brands to drive smarter decisions, enable faster actions and optimize outcomes. Get expert advice.
LRTV Interviews
From 4G to 5G: Alcatel-Lucent's Dave Geary

11|25|14   |   09:09   |   (1) comment


Dave Geary, President of Wireless at Alcatel-Lucent, talks about the evolution of the 4G market, small cells, partnerships, 5G and the IoT.
LRTV Huawei Video Resource Center
Building a Secure Telefonica Network With Huawei's High-End Firewall

11|24|14   |   4:37   |   (0) comments


Andrew Davies, IP architect of the Telefonica, a leading digital communications company, discusses the Huawei security gateway solution and putting the solution into the testbed.
LRTV Huawei Video Resource Center
Huawei Partners with Spirent to Verify CE12816's 10GE Port & TRILL Networking Capabilities

11|24|14   |   2:50   |   (0) comments


Spirent Communications is the world's leading supplier for telecom testing appliances and solutions. Spirent has been in a close partnership with Huawei for a long time.
LRTV Huawei Video Resource Center
Saudi Airlines & Its ICT Transformation

11|24|14   |   2:07   |   (0) comments


In this video, Saudi Airlines discusses its network problems and how Huawei's Agile Network is its all-in-one solution.
LRTV Huawei Video Resource Center
Huawei's Agile Switch Benefiting Saudi Arabia's Yamamah Hospital

11|24|14   |   2:40   |   (0) comments


Saudi Arabia's Yamamah Hospital speaks about how Huawei's Agile Switch has improved the medical service's network infrastructure.
LRTV Huawei Video Resource Center
FanPlay & Huawei Build a Wireless Agile Smart Stadium

11|24|14   |   2:13   |   (0) comments


FanPlay is a cloud-based white label service, which is effectively a football fan engagement platform underpinned by mobile payment technology.
LRTV Huawei Video Resource Center
Building an Agile Stadium

11|24|14   |   3:54   |   (0) comments


Stadiums may be thousands of tons of concrete and steel, but they now need to be agile. Being at the stadium may not be as alluring as it once was. Sports franchises and stadium operators discuss how to get fans back.
LRTV Huawei Video Resource Center
Huawei Helps ChinaCache Tackle Challenges in the Internet Industry

11|24|14   |   3:09   |   (0) comments


ChinaCache is China's largest content distribution network supplier. Huawei's CE12800 has provided ChinaCache with very strong support in its establishment of an infrastructure network.
LRTV Huawei Video Resource Center
Cefinity on Managed Security Services & Next-Generation Firewall

11|24|14   |   7:05   |   (0) comments


Cefinity is a cloud management service provider in Southeast Asia. Ivan Zhang, CEO of the company, discusses the implementation of security service management in the cloud era.
LRTV Huawei Video Resource Center
Huawei's Agile Gateway in the Eyes of Cefinity

11|24|14   |   2:11   |   (0) comments


Cefinity is a managed service provider for enterprise networks. The company currently uses Huawei's AR series routers for the most complete range of functions. CEO Ivan Zhang speaks about the advantages of the AR series routers.
LRTV Huawei Video Resource Center
CTO of Bus-Online Talks About Huawei's Agile Gateway

11|24|14   |   2:53   |   (0) comments


Bus-Online covers around 100 million users everyday. In addition to providing mobile TV, and advertising services to the public, Bus-Online has also entered the field of mobile Internet.
Upcoming Live Events
December 2, 2014, New York City
December 3, 2014, New York City
December 8-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
April 14, 2015, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
Irish Telecom outlines the rise of VoIP technology, including its adoption within businesses and their perception of its quality.
Hot Topics
Net Neutrality Even Mark Cuban Could Love
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/26/2014
Eurobites: Net Neutrality Battle Looms
Paul Rainford, Assistant Editor, Europe, 11/27/2014
Why 5G Is a Different Beast
Robert Clark, 11/26/2014
New Juniper CEO Can Be Thankful for $14.5M
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/25/2014
Amazon Eyes Ad-Supported Video – NY Post
Mari Silbey, Independent Technology Editor, 11/25/2014
Like Us on Facebook
Twitter Feed